Arbitration Petn. No. 204 of 1990, in Summary Suit No. 2901 of 1987

15th February, 1991

Respondent Counsel: A. Y. Bookwala with -. Haidy, .

Cases Cited:
(1862) 32 LJQB 55 : 11 WR 75 Hart v. Duke (Referred) [Para 7]

JUDGMENT

ORDER :-This is a petition under Section 11 of the Indian Arbitration Act praying for (a) setting aside the appointment of the Arbitrator (the 2nd respondent herein is the sole Arbitrator, and (b) grant of sufficient time to the petitioner to make fresh appointment of some other Arbitrator to commence and complete the reference "from the stage the same was left before the 2nd respondent"

2. The facts giving rise to this Arbitration petition are as follows. There were two suits in this Court and since the plaintiff in one suit is the defendant in another suit, I will refer to the parties by their names in order to avoid confusion. Summary Suit No. 2901 of 1987 was filed by Industrial Distributors (respondent No. 1 in this petition). That suit was against Smt. Varsha Manharlal Mohta (present petitioner) as defendant No. 1 proprietress of M/s. Manish Agency, and Manharlal S. Mohta (respondent No. 3 in this petition) as defendant No. 2. Manharlal Mohta is the husband of Smt. Varsha Mohta. In that Summary suit a claim was made for Rs. 19.61 lacs and odd on account of the goods sold and delivered to Varsha M. Mohta. It may be stated at the outset that it was not denied that the goods of the value of Rs. 19.61 Lacs and odd (being principal plus interest) were sold and supplied to Varsha Mohta. Suit No. 3587 of 1987 was filed by Varsha Mohta against Industrial Distributors claiming a sum of Rs. 37.17 lacs and odd on account of certain discounts claimed in respect of the goods sold and delivered by Industrial Distributors to Varsha Mohta. Summons for judgment No. 687 of 1987 was taken out in summary Suit No. 3901 of 1987. At that stage, however, consent terms were filed between the parties and copy of the same is at page 28 of the Affidavit-in-reply filed in this petition. It would help us to reproduce the entire consent Terms here and they read as follows :

"1. By consent of plaintiffs and Defendants agreed and ordered that all disputes, differences and claims in the suit herein and in Suit No. 3587 of 1987 filed by the 1st defendant herein against the plaintiffs herein in this Hon'ble Court, be and they are hereby referred to the Arbitration of Shri S. W. Doctor, Sr. Adv., as the sole Arbitrator appointed by the parties herein.

2. The sole Arbitrator shall have summary powers and shall have discretion to record or to refuse to record such evidence

and maintain such notes as he deems necessary. The sole arbitrator shall not be required to give any reasons. The sole arbitrator shall have power to consult any professional or businessman with or without any reference to any of the parties.

3. The parties may file replies and/or further pleadings and/or statements and/or documents and/or affidavits as may be permitted by the sole arbitrator. The papers and proceedings in the present suit and also in the said Suit No. 3597 of 1987 shall form part of the arbitration proceedings.

4. The sole distributor shall enter upon reference within a period of 15 days from the date of service upon the sole arbitrator a certified copy of the present consent terms. The sole arbitrator to make and publish his award within a period of four months from the date of the entering upon the reference.

5. The sole arbitrator shall have power to extend time by consent of the parties.

6. The costs of and incidental to the suit and of the arbitration proceedings shall be in the discretion of the sole arbitrator.

7. During the pendency of the arbitration proceedings all further proceedings in the present suit and in said suit No. 3587 of 1987 be stayed"

3. On 13th February 1988 the arbitrator called the first meeting before him when both the parties appeared through their respective advocates. The arbitrator gave preliminary directions and his fee was fixed by consent of parties at Rs. 750/- per hour or part thereof and the fee of his clerk was fixed at Rs. 75/- per hour or part thereof. It was agreed that the fees would be paid by the parties in equal share. Thereafter the arbitrator proceeded with the arbitration and held about 37 arbitration meetings. Smt. Varsha Manharlal Mehta took several adjournments. The arbitrator recorded the evidence of Shri Manharlal S. Mehta given by him on behalf of Smt. Varsha Manharlal Mehta and documents were also tendered on their behalf. After the evidence of Smt. Varsha H. Mehta and Shri Manharlal S. Mehta was over, evidence was led by M/s. Industrial Distributors. They led the evidence of their partner-Accountant on 5th February 1990. Again at the request of Smt. Varsha Mehta and Shri Manharlal Mehta, the adjournment was granted by consent to 21st February 1990. On 21st February 1990 Shri Manharlal Mehta informed the arbitrator that he and his wife had discharged their advocates M/s. L. C. Lolat and Co. and applied for time for appointment of another advocate to proceed with the arbitration proceedings. For this reason the arbitration could not proceed until 6th April 1990. On 6th April 1990, M/s. Industrial Distributors examined their handwriting expert Shri Haresh Gajjar. It appears that the arbitrator was quite liberal in the matter of permitting Smt. Varsha Mehta and Shri Manharlal Mehta to cross-examine the handwriting expert Shri Haresh Gajjar as he was first allowed to be cross-examined by Anil Kumar Mathur, the handwriting expert engaged by Smt. Varsha Mehta and her husband, and then the arbitrator allowed the counsel of Smt. Varsha Mehta and her husband to cross-examine Shri Haresh Gajjar. Notes of evidence running altogether into 65 pages had been recorded by the arbitrator. He spent about 55 hours. Both the parties were represented by their respective advocates and counsel at the arbitrator's meetings. On 18th August 1990 Shri Haresh Gajjar's cross-examination was continued and at that time the advocate on behalf of the Mehtas requested the arbitrator to accept their clients' share of arbitration fee at the end of each arbitration meeting. Till this stage the arbitrator used to take his arbitration fee for certain hours at a time in advance. However, this time also the arbitrator conceded to the request of the advocate on behalf of the Mehtas. Thereafter on 21st August 1990 the advocate on behalf of the Mehtas wrote a letter to the arbitrator and for the first time requested him to reduce his arbitration fee. It was stated in the said letter that if the fees were not reduced by the arbitrator then the Court would be moved for change of arbitrator. The arbitrator refused to reduce his fees. It will be noticed that during all this time no grievance of any misconduct against the arbitrator was

made by any of the parties. On 25th August 1990 there was a meeting for the arbitration and at that time the counsel for the Mehtas applied for three weeks' adjournment for moving the Court for change of arbitrator. It may be pointed out that this was the stop which the Mehtas had expressed in their letter dated 21st August 1990 stating that this would be done if the arbitrator refused to reduce his fees. The impression given was that if the arbitrator agreed to reduce his fees, the Mehtas would have no objection to proceed with the arbitration to its conclusion. The next stop that is necessary to be mentioned is that the present petition was filed on 8th November 1990 for the reliefs as stated above.

4. The grounds made out in this petition for setting aside the appointment of the arbitrator are two viz. (i) the Mehtas find it difficult to pay the fees of the arbitrator unless the fees of the arbitrator are reduced, and (ii) the arbitrator is biased and has misconducted himself.

5. As regards the fees of the arbitrator, it may be pointed out that not only the name of the arbitrator was agreed upon by both the sides but even the fees were agreed upon before the arbitrator entered upon the arbitration. It will also be seen from what is stated above that it is the Mehtas who have been responsible for the delay and for prolonging the matter of proceedings with the arbitration. I may state at this stage that Mr. Bookwala has made a statement before me that Industrial Distributors would not be leading any further evidence. Thus the matter would end as soon as the cross-examination of the handwriting expert Haresh Gajjar is completed on behalf of the Mehtas. Mrs. Nanavati, on the other hand, states that the matter would still be prolonged as the Mehtas want further evidence to be recorded and that Manharlal S. Mehta would be re-called for giving further evidence. Secondly, the representative of M/s. Adwani Orlikon Ltd., who was already examined and crossexamined, would also be re-called to give further evidence and then the accountant of Industrial Distributors who was examined on behalf of Industrial Distributors and whose cross-examination had been concluded would again be recalled for further crossexamination and though the Mehtas had closed their evidence they would now call two more witnesses who are presently at Delhi on the point of proving an oral agreement regarding payment of discount and farther evidence would also be led on behalf of the Mehtas to establish practice followed in the matter of payment of discount for sale of similar merchandise. It will be noticed from this that the Mehtas intend to prolong the matter still further. If, therefore, they are unable to pay the costs of the arbitrator at the rate at which they themselves agreed, then this is because of lengthening the time of proceedings for which they themselves appear to be responsible and yet they want change of arbitrator on the point of fees of the arbitrator.

6. Now let us see what is the ground they have made showing the arbitrator's interest in one of the parties. This is stated in paragraph 33 of their petition which reads as follows :

"The petitioner states that the respondent No. 2 does not have office of his own and is sitting in the office of his father who incidentally was at relevant time the Chairman of the Bombay Mercantile Co-operative Bank Ltd. which has lent and advanced a huge loan to the respondent No. 1 at relevant time. The petitioner in this respect craves leave to refer to and rely upon the balance sheet of respondent No. 1 and also the annual report of the said bank, when produced"

Clearly frivolous allegation of remote nature is made against the arbitrator.

7. As regards the allegation that the arbitrator has shown interest in one of the parties, this is stated in paragraph 34 of the petition. The allegation appears to be that the arbitrator used to suggest to the handwriting expert of Industrial Distributors as to what answers he should give. It is not made clear as to which were those suggestions that were made by the arbitrator. Further it is pertinent to note that this allegation pertains to the stage of cross-examination of the handwriting

expert. It is difficult to accept that the Arbitrator who, it is nobody's case, is himself a handwriting expert, would suggest as to what answers the handwriting expert should give. Vague allegations are made. When question are asked and answers are to be taken, it is not unusual for a Judge to put questions to ascertain the real import of the questions in the first place, to assure himself that the witness has understood the questions properly and when the witness has understood the question, in order to ascertain true import of the answer. In a case where an Arbitrator refused to allow certain entries to be read which the Arbitrator thought were not relevant, when a grievance was made in that regard, an observation was made in Hart v. Duke, (1862) 32 LJ QB 55 reproduced on page 165 of Rusell on Arbitration, Nineteenth Edition, which reads as follows : "Where an arbitrator refused to allow certain entries to be read which he did not think relevant, Blackburn, J. said : "You may call it misconduct if you like; but it imputes to him no more misconduct than is continually imputed to every Judge in Westminster Hall" I would say the same thing in respect of the vague allegations made in paragraph 34 of the petition.

8. For the above said reasons, the petition is dismissed with costs. Stay to stand vacated on the expiry of two weeks from today.

Petition Dismissed